I have recently had a number of clients purchasing holiday homes and investment properties, which is great, as it shows people are taking advantage of some ideal buying opportunities coupled with the low interest rates and living the Aussie dream of owning property. The not so great part is the Government’s Land Tax which may be payable.
Land Tax is a tax levied on the owners of land in NSW as at midnight on 31 December of each year. The Land Tax is then payable in the calendar year following. In general, your principal place of residence (your home) or land used for primary production (a farm) is exempt from Land Tax. However you may be liable for Land Tax if you own or part-own:
• vacant land, including vacant rural land
• land where a house, residential unit or flat has been built
• a holiday home
• investment properties
• company title units
• residential, commercial or industrial units, including car spaces
• commercial properties, including factories, shops and warehouses
• land leased from State or Local Government
Land Tax is calculated on the combined value of all the taxable land you own above the Land Tax threshold. The current rate of tax is $100 plus 1.6% of the land value between the threshold and the premium rate threshold and 2% thereafter.
If land is owned by a trustee of a special trust the Land Tax threshold does not apply and Land Tax will be charged at a flat rate of 1.6% of the taxable land value, up to the premium threshold of $2,421,000, and then 2% thereafter.
If the combined value of your land does not exceed the threshold, no Land Tax is payable.
The 2012 Land Tax threshold is $396,000. The premium Land Tax threshold for the 2012 Land Tax year is $2,421,000.
Example: if you purchased any of the above examples of property and the land value was $800,000, your Land Tax liability for the 2012 year would be $6,564 (provided you were entitled to receive the Land Tax threshold).
Land Tax is not automatically charged by the Office of State Revenue (OSR) when you purchase a property. It is your duty, or if you choose to seek assistance, the duty of your lawyer, conveyancer or accountant to lodge an initial return with the OSR to advise them of your property holdings. You are also obliged to advise the OSR when you have sold a property and your property holdings have changed.
There can be severe penalties and interest imposed on you if you do not comply with the Land Tax legislations.
Another reason that prompted me to write this blog was a recent article I read in the Sydney Morning Herald that advised there have been a number of landowners having their private and commercial property values reduced for Land Tax rating purposes. This has prompted concern from the NSW Government about the states valuation system. The figures showed a significant fluctuation in determinations of land values. The NSW Government uses these valuations to determine Land Tax and compulsory acquisitions of land, and Council’s use them to determine their rates.
One of the examples used in the article was a unit block in Point Piper where the initial valuation was $17.2 million and, after an objection, the land value was knocked down to $9.5 million. This is a huge difference of $7.7 million and a huge saving in Land Tax.
You are entitled to lodge an objection in relation to your Land Tax assessment; however this must be completed within 60 days after receipt of your Land Tax assessment.